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Understanding the Financial Planning Process #1
The Rewards of  Sound Financial Planning <ul><li>Maintain and improve  standard of living </li></ul><ul><li>Control spendi...
Improving Your Standard  of Living
Average American Family
The Personal Financial  Planning Process <ul><li>S ystematic process that considers important elements of an individual’s ...
Six-Step Financial  Planning Process <ul><li>1. Define financial goals </li></ul><ul><li>2. Develop financial plans and st...
The Role of Money <ul><li>Medium of exchange   used to  measure value </li></ul><ul><li>Utility  amount of satisfaction  d...
Attain Your Financial Goals <ul><li>Set specific goals and focus on results </li></ul><ul><li>Make goals realistic </li></...
Put Target Dates on  Financial Goals <ul><li>Short-term   in the next year </li></ul><ul><li>Intermediate-term   the next ...
From Goals to Plans: A Lifetime of Planning <ul><li>Early childhood </li></ul><ul><li>High school and college </li></ul><u...
Personal Financial Planning Life Cycle
How a $1,000 Investment  Grows over Time
Plans to Achieve Your Financial Goals <ul><li>Asset acquisition planning </li></ul><ul><li>Liability and insurance plannin...
Using Professional Financial Planners <ul><li>Types of planners  </li></ul><ul><li>Commission-based   – earn commission on...
The Planning Environment <ul><li>Financial planning takes place in a dynamic economic environment created by the actions o...
Financial Planning Environment
Government <ul><li>Federal government plays a major role in regulating the level of economic activity </li></ul><ul><li>Ta...
The Economy <ul><li>Monetary Policy </li></ul><ul><li>Controls money supply </li></ul><ul><li>Used to stimulate or contrac...
The Economy <ul><li>Economic Cycles </li></ul><ul><li>Stages related to employment and production levels </li></ul><ul><li...
The Economic Cycle
What Determines Your Personal Income? <ul><li>Demographics and income </li></ul><ul><ul><li>Age, marital status </li></ul>...
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Chap 1 pfin

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Chapter 1, Finance 8 Power Point

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Transcript of "Chap 1 pfin"

  1. 1. Understanding the Financial Planning Process #1
  2. 2. The Rewards of Sound Financial Planning <ul><li>Maintain and improve standard of living </li></ul><ul><li>Control spending in order to live well today and tomorrow </li></ul><ul><li>Accumulate wealth </li></ul>
  3. 3. Improving Your Standard of Living
  4. 4. Average American Family
  5. 5. The Personal Financial Planning Process <ul><li>S ystematic process that considers important elements of an individual’s financial affairs in order to fulfill financial goals </li></ul>
  6. 6. Six-Step Financial Planning Process <ul><li>1. Define financial goals </li></ul><ul><li>2. Develop financial plans and strategies </li></ul><ul><li>3. Implement financial plans and strategies </li></ul><ul><li>4. Develop and implement budgets </li></ul><ul><li>5. Use financial statements to evaluate results </li></ul><ul><li>6. Redefine goals, revise plans as situations change </li></ul>
  7. 7. The Role of Money <ul><li>Medium of exchange used to measure value </li></ul><ul><li>Utility amount of satisfaction derived from purchases versus cost </li></ul><ul><li>Link to personal psychological concepts and key role in personal relationships </li></ul>
  8. 8. Attain Your Financial Goals <ul><li>Set specific goals and focus on results </li></ul><ul><li>Make goals realistic </li></ul><ul><li>Involve family members and others </li></ul><ul><li>Prioritize goals and set a time frame </li></ul>
  9. 9. Put Target Dates on Financial Goals <ul><li>Short-term in the next year </li></ul><ul><li>Intermediate-term the next 2-5 years </li></ul><ul><li>Long-term 6 years or more </li></ul>
  10. 10. From Goals to Plans: A Lifetime of Planning <ul><li>Early childhood </li></ul><ul><li>High school and college </li></ul><ul><li>Family formation </li></ul><ul><li>Career development </li></ul><ul><li>Pre-retirement </li></ul><ul><li>Retirement </li></ul>
  11. 11. Personal Financial Planning Life Cycle
  12. 12. How a $1,000 Investment Grows over Time
  13. 13. Plans to Achieve Your Financial Goals <ul><li>Asset acquisition planning </li></ul><ul><li>Liability and insurance planning </li></ul><ul><li>Savings and investment planning </li></ul><ul><li>Employee benefits planning </li></ul><ul><li>Tax planning </li></ul><ul><li>Retirement and estate planning </li></ul>
  14. 14. Using Professional Financial Planners <ul><li>Types of planners </li></ul><ul><li>Commission-based – earn commission on financial products sold </li></ul><ul><li>Fee-only – charge fees based on complexity of the plan </li></ul>
  15. 15. The Planning Environment <ul><li>Financial planning takes place in a dynamic economic environment created by the actions of </li></ul><ul><ul><li>Government </li></ul></ul><ul><ul><li>Business </li></ul></ul><ul><ul><li>Consumers </li></ul></ul>
  16. 16. Financial Planning Environment
  17. 17. Government <ul><li>Federal government plays a major role in regulating the level of economic activity </li></ul><ul><li>Taxation and regulation constrain personal financial planning </li></ul>
  18. 18. The Economy <ul><li>Monetary Policy </li></ul><ul><li>Controls money supply </li></ul><ul><li>Used to stimulate or contract economic growth </li></ul><ul><li>Fiscal Policy </li></ul><ul><li>Controls levels of taxation </li></ul><ul><li>Sets levels of government spending </li></ul>
  19. 19. The Economy <ul><li>Economic Cycles </li></ul><ul><li>Stages related to employment and production levels </li></ul><ul><li>Growth measured by changes in GDP </li></ul><ul><li>Inflation </li></ul><ul><li>Measured by changes in CPI </li></ul><ul><li>Affects purchasing power and interest rates </li></ul><ul><li>Affects financial plans and goals </li></ul>
  20. 20. The Economic Cycle
  21. 21. What Determines Your Personal Income? <ul><li>Demographics and income </li></ul><ul><ul><li>Age, marital status </li></ul></ul><ul><li>Education </li></ul><ul><li>Where you live </li></ul><ul><li>Career </li></ul>
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